Transportation and Transit Funds Audited Financial Statements Years Ended June 30, 2014 and 2013
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Transportation and Transit Funds Audited Financial Statements June 30, 2014 and 2013 Table of Contents Independent Auditor s Report... 1-2 Financial Statements Local Transportation Fund Special Revenue Funds Balance Sheet... 3 Statements of Revenues, Expenditures, and Changes in Fund Balance... 4 Transit Fund Enterprise Funds Statements of Net Position... 5 Statements of Revenues, Expenses, and Changes in Net Position... 6 Statement of Cash Flows... 7 Notes to Financial Statements... 9-15 Other Reports Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards, the Transportation Development Act, Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA) and Measure R Funds... 17-18 Page
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INDEPENDENT AUDITOR S REPORT City Council City of Porterville Porterville, California Report on the Financial Statements We have audited the accompanying financial statements of the Transportation and Transit Funds of the City of Porterville, California (City), as of and for the year ended June 30, 2014, and the related notes to the financial statements, as listed in the table of contents. The prior year comparative information has been derived from the Funds 2013 financial statements which were audited by other auditors. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Transportation and Transit Funds of the City as of June 30, 2014 and 2013, and the changes in financial position and, where applicable, cash flows thereof for the fiscal years then ended in accordance with accounting principles generally accepted in the United States of America. 1 925 Highland Pointe Drive, Suite 450, Roseville, CA 95678-5418 tel: 916.784.7800 fax: 916.784.7850 www.gallina.com
City Council City of Porterville Emphasis of Matter As discussed in Note l A, the financial statements present only the Transportation and Transit Funds and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2014 and 2013, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. As discussed in Note 8, net position of the Transit Fund was restated to correct for revenue recognized in advance of meeting the criteria for recognition. Our opinion is not modified with respect to this matter. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 20, 2015, on our consideration of the City s internal control over financial reporting as it relates to the Transportation and Transit Funds and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City s internal control over financial reporting and compliance. Roseville, California February 20, 2015 2
Local Transportation Fund Balance Sheets June 30, 2014 and 2013 2014 2013 Assets Cash in Treasury $ 1,563,828 $ 2,674,867 Due from other governmental agencies 2,571,547 212,226 Total Assets $ 4,135,375 $ 2,887,093 Liabilities Accounts payable $ - $ - Deferred Inflows of Resources Unavailable grant revenue 971,909 - Fund Balance: Restricted for: Laws and regulations of other governments 3,163,466 2,887,093 Total Liabilities Deferred Inflows of Resources and Fund Balance $ 4,135,375 $ 2,887,093 The accompanying notes are an integral part of these financial statements. 3
Local Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For the Years Ended June 30, 2014 and 2013 2014 2013 Revenues: Local Transportation Funds $ 1,015,758 $ 1,790,552 Measure R 1,344,132 1,209,200 Other grants 636,258 69,572 Interest 41,742 6,716 Total Revenues 3,037,890 3,076,040 Expenditures: Streets and roads 2,761,517 1,783,315 Change in Fund Balance 276,373 1,292,725 Fund Balance, July 1 2,887,093 1,594,368 Fund Balance, June 30 $ 3,163,466 $ 2,887,093 The accompanying notes are an integral part of these financial statements. 4
Transit Fund Statement of Net Position June 30, 2014 and 2013 Assets 2014 2013 Current Assets: Cash in City Treasury $ 534,653 $ 1,226,268 Fares receivable 210,505 90,960 Due from other governments 517,017 356,633 Total Current Assets 1,262,175 1,673,861 Capital Assets: Nondepreciable 796,850 927,992 Depreciable, net 7,423,226 6,090,425 Liabilities Total Capital Assets 8,220,076 7,018,417 Total Assets 9,482,251 8,692,278 Current Liabilities: Accounts payable 131,164 110,144 Payroll payable 1,120 1,946 Unearned revenue 1,357,088 1,783,777 Net Position Total Liabilities 1,489,372 1,895,867 Investment in capital assets 8,220,076 7,018,417 Unrestricted (deficit) (227,197) (222,006) Total Net Position $ 7,992,879 $ 6,796,411 The accompanying notes are an integral part of these financial statements. 5
Transit Fund Statement of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2014 and 2013 2014 2013 Operating Revenues: Fares $ 576,760 $ 440,974 Operating Expenses: Purchased transportation 1,460,538 1,165,726 Vehicle maintenance 765,215 548,756 General and administrative 297,253 146,236 Depreciation 601,162 466,067 Total Operating Expenses 3,124,168 2,326,785 Operating Loss (2,547,408) (1,885,811) Non-Operating Revenues: Local Transportation Funds 882,820 - State Transit Assistance Funds 623,029 280,541 Measure R 105,000 105,000 State grants and reimbursements 62,271 - Federal grants 1,467,376 1,410,594 Interest 4,588 2,811 Other revenues 46,848 6,123 Gain on disposal of capital assets 1,230 - Total Non-Operating Revenues 3,193,162 1,805,069 Income (Loss) Before Contributions 645,754 (80,742) Capital contributions 550,714 1,000,595 Changes in Net Position 1,196,468 919,853 Total Net Position - Beginning, Restated 6,796,411 5,876,558 Total Net Position - Ending $ 7,992,879 $ 6,796,411 The accompanying notes are an integral part of these financial statements. 6
Transit Fund Statement of Cash Flows For the Years Ended June 30, 2014 and 2013 2014 2013 Cash Flows from Operating Activities: Cash received from customers $ 457,215 $ 377,996 Cash payments to employees for services (37,480) (27,920) Cash payments to suppliers for goods and services (2,470,523) (1,814,263) Net Cash Used in Operating Activities (2,050,788) (1,464,187) Cash Flows from Non-Capital Financing Activities: Local Transportation Funds 596,131 224,374 State Transit Assistance Funds 623,029 505,033 Other grants 105,000 470,723 Intergovernmental - operating assistance 1,271,991 1,359,689 Subsidy from federal and state grants - 210,464 Other revenue 4,120 21,014 Net Cash Provided from Non-Capital Financing Activities 2,600,271 2,791,297 Cash Flows from Capital and Related Financing Activities: Construction and other capital projects (836,371) (595,900) Acquisition of fixed assets (961,259) (719,969) Disposal of equipment 1,230 290 Prop 1B PTMISEA 169,263 830,723 Subsidy from federal and state grants 381,451 169,872 Net Cash Provided from (Used in) Capital and Related Financing Activities (1,245,686) (314,984) Cash Flows from Investing Activities: Interest income 4,588 2,811 Net Increase (Decrease) in Cash (691,615) 1,014,937 Cash, July 1 1,226,268 211,331 Cash, June 30 $ 534,653 $ 1,226,268 Reconcile of Operating Loss to Net Cash Used in Operating Activities: Operating loss $ (2,547,408) $ (1,885,811) Adjustment to reconcile operating loss to net cash used in operating activities: Depreciation 601,162 466,067 Change in assets and liabilities: (Increase) decrease in fares receivable (119,545) (62,978) Increase (decrease) in accounts payable 15,829 16,953 Increase (decrease) in accrued payroll (826) 1,582 Net Cash Used in Operating Activities $ (2,050,788) $ (1,464,187) The accompanying notes are an integral part of these financial statements. 7
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Transportation and Transit Funds Notes to Financial Statements June 30, 2014 and 2013 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The financial statements are intended to reflect the financial position, results of operation and compliance of the Transportation Development Act (TDA), Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA) and the Tulare County Measure R funds allocated for nontransit and transit purposes to the Transportation Fund and the Transit Fund of the City of Porterville with the laws, rules and regulations of the Transportation Development Act, the Tulare County Association of Governments and Proposition 1B bond compliance. They do not present fairly the financial position and results of operations of the City of Porterville, in conformity with generally accepted accounting principles. B. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity or net position, revenues and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statements in this report, into two generic fund types and two broad fund categories as follows: Government Fund Types Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to expenditures for specified purposes. Proprietary Funds Enterprise Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through use charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accounting ability, or other purposes. C. Basis of Accounting Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences are recorded only when payment is due. Capital asset acquisitions are reported expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. 9
Transportation and Transit Funds Notes to Financial Statements June 30, 2014 and 2013 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Basis of Accounting (continued) When both restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, then unrestricted as they are needed. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. D. Deposits and Investments Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Under the provisions of the City s investment policy and California Government Code Section 53601, the City s Treasury is authorized to invest in negotiable certificates of deposit, obligations of the U.S. Treasury, banker s acceptances, certain federal agency obligations, commercial paper, guaranteed investment contracts (GIC), and the California Local Agency Investment Fund (LAIF). The policy does not permit investment in Repurchase Agreements, or borrow funds through the use of Reverse-Repurchase Agreements. The collateral underlying investments must be delivered to the City. If U.S. Treasury Bills are used as the underlying collateral, delivery may be made by book entry only. For all other collateral, the security must be physically delivered either to the City or to a third-party custodial agent. All investments are reported at fair value. California banks and savings and loan associations are required to secure a city s deposits by pledging government securities as collateral. The fair value of the pledged securities must equal at least 110 percent of a city s deposits. The City Treasurer, at his or her discretion, may waive the 110 percent collateral requirement for deposits that are insured up to the $250,000 by the FDIC. It is the City s policy to waive the collateral requirement in order to receive a higher interest yield on its deposits. It is also the City s policy not to deposit more than $250,000 in a savings and loan association or a small bank. California law allows financial institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150 percent of a city s total deposits. It is the City s policy not to accept this form of collateral. E. Capital Assets Capital assets are defined as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. As the City acquires additional capital assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs, which are amounts essentially spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimates. In case of donations, capital assets are valued at their estimated fair value at the date of donation. Depreciation is recorded on a straight-line basis over the useful life of the following assets: Buildings Structural Improvements Machinery and equipment (non-auto) Vehicles 50 years 20 years 5 years 5 years 10
Transportation and Transit Funds Notes to Financial Statements June 30, 2014 and 2013 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Use of Management Estimates The preparation of the basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Accordingly, actual results could differ from those estimates. G. Fund Equity In the fund financial statements, the following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: Nonspendable fund balance This includes amounts that cannot be spent because they are either not spendable in form or legally or contractually required to remain intact. Restricted fund balance This includes amounts with constraints placed on their use by those external to the City, including creditors, grantors, contributors, or laws or regulations of other governments. It also includes constraints imposed by law through constitutional provisions or enabling legislation. Committed fund balance This includes amounts that can only be used for specific purposes determined by formal action of the City Council and that remain binding unless removed in the same manner. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period. Assigned fund balance This includes amounts that are constrained by the City s intent to be used for specific purposes. The intent can be established at either the highest level of decision making or an official designated for that purpose. Unassigned fund balance This is the residual classification that includes amounts not contained in the other classifications. The City Council establishes, modifies or rescinds fund balance commitments and assignments by passage of a resolution. When restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, followed by the unrestricted resources that are committed, assigned and unassigned, in this order as they are needed. H. Implementation of Accounting Pronouncements The City implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions effective for the year ended June 30, 2011. This statement enhances the usefulness of fund balance information by providing a clearer fund balance classification that can be more consistently applied, and it clarifies the existing governmental fund type definitions. It establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reporting in governmental funds. These classifications are described in the Fund Balance section of this note. The City implemented GASB No. 54 by adopting a Fund Balance Policy. This policy is in place to provide a measure of protection for the City against unforeseen circumstances and to comply with GASS Statement No. 54. No other policy or procedure supersedes the authority and provisions. 11
Transportation and Transit Funds Notes to Financial Statements June 30, 2014 and 2013 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Reclassifications Certain prior year balances may have been reclassified in order to conform to current year presentation. NOTE 2: CASH AND CASH EQUIVALENTS The City follows the practice of pooling cash and investments of all funds except those required to be held by outside fiscal agents under the provisions of bond indentures. Interest income earned on the pooled cash and investments is allocated monthly to the various funds based on monthly cash balances. The investment policy of the City of Porterville is consistent with guidelines set forth under State of California Government Code Section 53601 and serves to maximize investment income consistent with safe and prudent investment practices. All surplus funds are managed by the City Finance Director in compliance with the Statement of Investment Policy adopted by the City Council which delegates to the City Finance Director the authority to invest the City funds and to deposit securities. Information regarding categorization of investments can be found in the City s financial statements. NOTE 3: PORTERVILLE DIAL-A-COLT The City of Porterville has contracted with Sierra Management to provide service for the management and operation of a demand-responsive transit system. NOTE 4: CAPITAL ASSETS The changes in capital assets and the related accumulated depreciation for the years ended June 30, 2014 and 2013 are as follows: Capital Assets: Non-Depreciable Assets: Land 352,599 Balance Additions/ Balance July 1, 2013 Adjustments Deletions June 30, 2014 $ $ - $ - $ 352,599 Construction in progress 575,393 (131,142) - 444,251 Total Non-Depreciable Assets 927,992 (131,142) - 796,850 Depreciable Assets: Buildings 2,757,699 - - 2,757,699 Structural improvements 764,097 146,829-910,926 Machinery & equipment 489,175 40,681-529,856 Vehicles 5,009,407 920,578 143,802 5,786,183 Infrastructure - 825,876-825,876 Total Depreciable Assets 9,020,378 1,933,963 143,802 10,810,539 Less: accumulated depreciation 2,929,953 601,162 143,802 3,387,313 Capital Assets, Net $ 7,018,417 $ 1,201,659 $ - $ 8,220,076 12
Transportation and Transit Funds Notes to Financial Statements June 30, 2014 and 2013 NOTE 4: CAPITAL ASSETS (CONTINUED) Balance Additions/ Balance July 1, 2012 Adjustments Deletions June 30, 2013 Capital Assets: Non-Depreciable Assets: Land $ 352,599 $ - $ - $ 352,599 Construction in progress 141,489 453,412 19,508 575,393 Total Non-Depreciable Assets 494,088 453,412 19,508 927,992 Depreciable Assets: Buildings 2,757,699 - - 2,757,699 Structural improvements 602,102 161,995-764,097 Machinery & equipment 277,140 212,035-489,175 Vehicles 4,501,473 507,934-5,009,407 Total Depreciable Assets 8,138,414 881,964-9,020,378 Less: accumulated depreciation 2,463,887 466,066-2,929,953 Capital Assets, Net $ 6,168,615 $ 869,310 $ 19,508 $ 7,018,417 NOTE 5: FARE REVENUE RATIO The City is required under the Transportation Development Act to maintain a fare revenue to operating expense ratio of 20% for year end June 30. The calculation of the fare revenue ratio for the years ended June 30, 2014 and 2013 is as follows: 2014 2013 Fare revenue $ 576,760 $ 440,974 Measure R expanded routes 105,000 105,000 Total Fare Revenue $ 681,760 $ 545,974 Operating expenses $ 3,124,167 $ 2,326,784 Less: depreciation (601,162) (466,066) Net Operating Expense $ 2,523,005 $ 1,860,718 Ratio 27.02% 29.34% The City met its fare revenue to operating expense ratio objective of 20% for the fiscal years ended June 30, 2014 and 2013. 13
Transportation and Transit Funds Notes to Financial Statements June 30, 2014 and 2013 NOTE 6: PTMISEA In November 2006, California voters passed a bond measure enacting the Highway Safety, Traffic Reduction, Air Quality and Port Security Bond Act of 2006. Of the $19.925 billion of state general obligation bonds authorized, $4 billion was set aside by the State as instructed by statute as the Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA). These funds are available to the California Department of Transportation for intercity rail projects and to transit operators in California for rehabilitation, safety or modernization improvements, capital service enhancements or expansions, new capital projects, bus rapid transit improvements or for rolling stock procurement, rehabilitation or replacement. During the fiscal year ended June 30, 2014, the City applied for and received proceeds of $169,263 from the State s PTMISEA account for the purchase of a bus stop amenities system and security enhancements. During the fiscal year ended June 30, 2013, the City applied for and received proceeds of $365,723 and $465,000 from the State s PTMISEA account for the purchase of a bus stop amenities system and CNG Buses. During the fiscal year ended June 30, 2014, the City expended restricted PTMISEA monies allocated during the year ended June 30, 2013, for bus stop amenities system and CNG Buses. As of June 30, 2014, all PTMISEA monies had not been expended on qualifying expenditures, resulting in unearned revenue as reported in Note 7. NOTE 7: UNEARNED REVENUES As of June 30, 2014, the Transit fund had unearned allocations and grants received in advance of meeting revenue recognition criteria as follows: Balance Balance July 1, 2013 Additions Deductions June 30, 2014 Indian Gaming Grant $ 57,271 $ 62,271 $ (57,271) $ 62,271 Local Transportation Fund 224,374 596,131 (224,374) 596,131 Measure R 365,723 105,000 (245,000) 225,723 Proposition 1B 911,917 170,266 (990,482) 91,701 State Transit Assistance 224,492 623,029 (466,259) 381,262 $ 1,783,777 $ 1,556,697 $ (1,983,386) $ 1,357,088 Balance Balance July 1, 2012 Additions Deductions June 30, 2013 Indian Gaming Grant $ - $ 57,271 $ - $ 57,271 Local Transportation Fund - 224,374-224,374 Measure R - 470,723 (105,000) 365,723 Proposition 1B 524,793 831,715 (444,591) 911,917 State Transit Assistance - 505,033 (280,541) 224,492 $ 524,793 $ 2,089,116 $ (830,132) $ 1,783,777 14
Transportation and Transit Funds Notes to Financial Statements June 30, 2014 and 2013 NOTE 8: RESTATEMENT OF NET POSITION The restatement of beginning net position of the Transit Fund is summarized as follows: Net position at July 1, 2013, as previously stated $ 8,035,578 Adjustment to due from other governments previously not reported 35,000 Elimination of due to other governments - origin unknown (509,611) Adjustment to unearned revenue to correct for revenue recognized prior to being eligible for recognition (764,556) Net position at July 1, 2013, as restated $ 6,796,411 The net effect of all adjustments was to reduce changes in net position for the prior year by $1,239,617 and adjust unearned revenues for revenues recognized in advance of meeting criteria for revenue recognition in accordance with Transportation Development Act rules. NOTE 9: SUBSEQUENT EVENTS Subsequent events have been evaluated through February 20, 2015, the date these financial statements have been made available to be issued. There were no subsequent events identified by management which would require disclosure in the financial statements. NOTE 10: RECENT ACCOUNTING PRONOUNCEMENTS GASB Statement No. 68, Accounting and Financial Reporting for Pensions Plans an amendment of GASB Statement No. 27. Statement No. 68 relates to accounting and financial reporting pension plans and does not apply to how governments approach the funding of their pension plans. GASB Statement No. 70, Accounting for Financial Reporting /or Nonexchange Financial Guarantees, this statement specifies the information required to be disclosed by governments that extend nonexchange financial guarantees. Application of Statement No. 70 is effective for the City s fiscal year ending June 30, 2014. 15
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OTHER REPORTS
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INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, THE TRANSPORTATION DEVELOPMENT ACT, PUBLIC TRANSPORTATION MODERNIZATION IMPROVEMENT AND SERVICE ENHANCEMENT ACCOUNT, AND MEASURE R City Council City of Porterville Porterville, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Transportation and Transit Funds of the City of Porterville, California (City), for the year ended June 30, 2014, and the related notes to the financial statements, and have issued our report thereon dated February 20, 2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City s internal control over financial reporting (internal control) as it relates to the Transportation and Transit Funds to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City s internal control. Accordingly, we do not express an opinion on the effectiveness of City s internal control. A deficiency in internal control exists when the design or operation of control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in the internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City s Transportation and Transit Fund financial statements are free of material misstatement, we performed tests of compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Our audit was further made to determine that Transportation Development Act (TDA) and Measure R funds allocated to and received by the City were expended in conformance with applicable statutes, rules and regulations of the 17 925 Highland Pointe Drive, Suite 450, Roseville, CA 95678-5418 tel: 916.784.7800 fax: 916.784.7850 www.gallina.com
TDA, Measure R Ordinance, and allocation instructions and resolutions of Tulare County Association of Governments as required by Section 6667 of Title 21 of the California Code of Regulations and the Tulare County Transportation Authority. Our audit was expanded to include verification of receipt and appropriate expenditures of PTMISEA bond funds in accordance with Government Code 8879.55(f). However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards the TDA, Measure R and PTMISEA. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Roseville, California February 20, 2015 18